Bitcoin ETFs are wrapped in a ‘thin layer’ of indirect regulations – CFTC Chair

The chairman of the Commodity Futures and Trading Commission, Rustin Behnam, believes that there is a risk that the recently approved spot bitcoin exchange-traded funds (ETFs) for Bitcoin (BTC) and other cryptocurrencies in general could be misinterpreted as strict regulations.

In a keynote address on January 26, the United States Securities and Exchange Commission (SEC) explained that there is an opportunity for retail and institutional investors to understand the legal certainty of spot Bitcoin ETFs following its decision to approve 11 applications on January 10.

While the approval now allows investors to expose themselves to Bitcoin without directly holding the asset, which is regulated by the SEC, they argue that there is no regulatory oversight of the money market for digital assets like crypto exchanges.

“There is nothing in the cash market to address the unclear and inconsistent practices for digital assets.”

Additionally, Behnam explains that this has implications for the transparency of Bitcoin ETFs, as asset management firms acquire the underlying assets for ETFs from the money market.

He raised concerns about trade settlement, conflict of interest, data reporting, cyber security, customer protection, transparency and overall market integrity.

“ETPs have taken speculative and volatile assets, wrapped them in a thin layer of implicit leverage and made it into a shiny new product,” he said.

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Enforcement of crypto regulations has been a popular topic of discussion within the US government in recent times, fueled by the interest of the crypto industry.

In September 2023, Cointelegraph reported that CFTC Commissioner Caroline Pham supported a limited pilot program to address crypto regulation.

Pham warns that the United States may soon need to “play” for crypto-friendly powers. She pointed out that the program will be similar to regulatory sandboxes that have already been introduced at the state level.

However, many in the crypto industry speculate that regulatory transparency may increase after the US presidential election in November.

A recent Jan. 2 survey by the Crypto Council for Innovation (CCI) found that a majority of crypto-focused individuals said the candidate's position on digital assets would be somewhat, very or extremely important.

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